Pakistan posts current account deficit as trade gap widens

KARACHI: Pakistan recorded a current account deficit of $1.17 billion in the October–December quarter of fiscal year 2026, driven by a widening trade gap despite strong workers’ remittances, central bank data showed on Monday.

According to the State Bank of Pakistan’s balance of payments data for December 2025, the country posted a current account deficit of $244 million in December, compared with a surplus of $957 million in the same month a year earlier.

For the first half of the fiscal year (July–December), the current account remained in surplus at $454 million, it said.

According to the SBP data, the trade deficit widened sharply as imports outpaced exports. Goods exports totalled $2.75 billion in December, while imports stood at $5.74 billion, resulting in a monthly trade deficit of $2.99 billion. For the October–December quarter, the trade deficit in goods and services widened to $8.95 billion, compared with $8.18 billion a year earlier.

Exports of services rose to $936 million in December, while imports of services stood at $1.31 billion, leaving a services trade deficit of $370 million for the month, the data showed.

The primary income account remained deeply negative, with a deficit of $747 million in December, largely due to profit repatriation and interest payments. However, this was partly offset by strong inflows under the secondary income account, mainly workers’ remittances.

The SBP said that workers’ remittances reached $3.59 billion in December, contributing to a secondary income surplus of $3.86 billion for the month. For the October–December quarter, remittances totalled $10.2 billion, helping cushion pressure from the widening trade gap.

On the financial account, Pakistan recorded net outflows of $596 million in December. Net foreign direct investment into Pakistan stood at $224 million, while portfolio investment recorded a net outflow of $32 million, reflecting reduced foreign investor participation in domestic debt and equity markets, the SBP said.

Other investment flows showed net outflows of $710 million, largely due to higher debt repayments.

Government loan disbursements during December amounted to $1.1 billion, while amortisation payments stood at $584 million, the data showed.

Pakistan’s overall balance of payments posted a deficit of $490 million in December, leading to a drawdown in foreign exchange reserves. However, reserves recovered later in the quarter, supported by external financing.

By the end of December, State Bank of Pakistan gross foreign exchange reserves stood at $17.36 billion, compared with $12.98 billion a year earlier, according to the central bank.

Economists say the data highlights Pakistan’s continued reliance on remittances to support its external position, while rising imports and debt servicing costs remain key risks to the balance of payments outlook.